United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2012
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _________ to _________

Commission file number 1-11986 (Tanger Factory Outlet Centers, Inc.)
Commission file number 333-3526-01 (Tanger Properties Limited Partnership)

TANGER FACTORY OUTLET CENTERS, INC.
TANGER PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
North Carolina (Tanger Factory Outlet Centers, Inc.)
56-1815473
North Carolina (Tanger Properties Limited Partnership)
56-1822494
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
3200 Northline Avenue, Suite 360
(336) 292-3010
Greensboro, NC 27408
(Registrant's telephone number)
(Address of principal executive offices)
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
Tanger Factory Outlet Centers, Inc.:
Title of each class
Name of exchange on which registered
Common Shares, $.01 par value
New York Stock Exchange
 
 
Tanger Properties Limited Partnership:
None
 
Securities registered pursuant to Section 12(g) of the Act:
Tanger Factory Outlet Centers, Inc.: None
Tanger Properties Limited Partnership: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Tanger Factory Outlet Centers, Inc.
Yes x   No o
Tanger Properties Limited Partnership
Yes o   No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Tanger Factory Outlet Centers, Inc.
Yes o   No x
Tanger Properties Limited Partnership
Yes o   No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Tanger Factory Outlet Centers, Inc.
Yes x   No o
Tanger Properties Limited Partnership
Yes x   No o


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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Tanger Factory Outlet Centers, Inc.
Yes x   No o
Tanger Properties Limited Partnership
Yes x    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Tanger Factory Outlet Centers, Inc.
x Large accelerated filer
 
o Accelerated filer
 
o Non-accelerated filer
 
o Smaller reporting company

Tanger Properties Limited Partnership
o Large accelerated filer
 
o Accelerated filer
 
x Non-accelerated filer
 
o Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).
Tanger Factory Outlet Centers, Inc.
Yes o   No x
Tanger Properties Limited Partnership
Yes o   No x

The aggregate market value of voting shares held by non-affiliates of Tanger Factory Outlet Centers, Inc. was approximately $3,040,628,242 based on the closing price on the New York Stock Exchange for such shares on June 30, 2012.

The number of Common Shares of Tanger Factory Outlet Centers, Inc. outstanding as of February 1, 2013 was 94,061,984.

Documents Incorporated By Reference
Part III incorporates certain information by reference from the Registrant's definitive proxy statement to be filed with respect to the Annual Meeting of Shareholders to be held May 17, 2013.

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PART I

EXPLANATORY NOTE

This report combines the annual reports on Form 10-K for the year ended December 31, 2012 of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership. Unless the context indicates otherwise, the term, Company, refers to Tanger Factory Outlet Centers, Inc. and subsidiaries and the term, Operating Partnership, refers to Tanger Properties Limited Partnership and subsidiaries. The terms “we”, “our” and “us” refer to the Company or the Company and the Operating Partnership together, as the text requires.

Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. The Company is a fully-integrated, self-administered and self-managed real estate investment trust, ("REIT"), which, through its controlling interest in the Operating Partnership, focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. The outlet centers and other assets are held by, and all of the operations are conducted by, the Operating Partnership and its subsidiaries. Accordingly, the descriptions of the business, employees and properties of the Company are also descriptions of the business, employees and properties of the Operating Partnership.

The Company owns the majority of the units of partnership interest issued by the Operating Partnership through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. Through May 31, 2011, the Tanger family, through its ownership of the Tanger Family Limited Partnership, held the remaining units as a limited partner. On June 1, 2011, the Tanger Family Limited Partnership was dissolved, and the units of the Operating Partnership owned by the Tanger Family Limited Partnership were distributed to the individual beneficial owners of the Tanger Family Limited Partnership. As a result, each such individual beneficial owner became an individual limited partner of the Operating Partnership (collectively the "Family Limited Partners").

As of December 31, 2012, the Company, through its ownership of Tanger GP Trust and Tanger LP Trust, owned 23,515,346 units of the Operating Partnership and the Family Limited Partners collectively owned 1,190,466 units. Each unit held by Family Limited Partners is exchangeable for four of the Company's common shares, subject to certain limitations to preserve the Company's REIT status. Prior to the Company's 2 for 1 splits of its common shares on December 28, 2004 and January 24, 2011, respectively, the exchange ratio was one for one.

Management operates the Company and the Operating Partnership as one enterprise. The management of the Company consists of the same members as the management of the Operating Partnership. These individuals are officers of the Company and employees of the Operating Partnership. The individuals that comprise the Company's Board of Directors are also the same individuals that make up Tanger GP Trust's Board of Trustees.

We believe combining the annual reports on Form 10-K of the Company and the Operating Partnership into this single report results in the following benefits:

enhancing investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.


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There are only a few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this report. We believe it is important, however to understand these differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated consolidated company. As stated above, the Company is a REIT, whose only material asset is its ownership of partnership interests of the Operating Partnership through its wholly-owned subsidiaries, the Tanger GP Trust and Tanger LP Trust. As a result, the Company does not conduct business itself, other than issuing public equity from time to time and incurring expenses required to operate as a public company. However, all operating expenses incurred by the Company are reimbursed by the Operating Partnership, thus the only material item on the Company's income statement is its equity in the earnings of the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. The Company itself does not hold any indebtedness but does guarantee certain debt of the Operating Partnership, as disclosed in this report. The Operating Partnership holds substantially all the assets of the Company and holds the ownership interests in the Company's consolidated and unconsolidated joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by the Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required through its operations, its incurrence of indebtedness or through the issuance of partnership units.

Noncontrolling interests, shareholder's equity and partners' capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partnership interests in the Operating Partnership held by the Family Limited Partners are accounted for as partners' capital in the Operating Partnership's financial statements and as noncontrolling interests in the Company's financial statements.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:

Consolidated financial statements;

The following notes to the consolidated financial statements:

Debt of the Company and the Operating Partnership;

Shareholders' Equity and Partners' Equity;

Earnings Per Share and Earnings Per Unit;

Share-based Compensation of the Company and Equity-based Compensation of the Operating Partnership;

Liquidity and Capital Resources in the Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report also includes separate Item 9A. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company operates the business through the Operating Partnership.

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As the 100% owner of Tanger GP Trust, the general partner with control of the Operating Partnership, the Company consolidates the Operating Partnership for financial reporting purposes. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

Item 1.
Business

The Company and the Operating Partnership

Tanger Factory Outlet Centers, Inc. and subsidiaries is one of the largest owners and operators of outlet centers in the United States and Canada. We are a fully-integrated, self-administered and self-managed REIT, which focuses exclusively on developing, acquiring, owning, operating and managing outlet shopping centers. As of December 31, 2012, we owned and operated 36 outlet centers, with a total gross leasable area of approximately 10.7 million square feet. These outlet centers were 99% occupied and contained over 2,300 stores, representing approximately 400 store brands. We also had partial ownership interests in 7 outlet centers totaling approximately 2.2 million square feet, including 3 outlet centers in Canada.

Our centers and other assets are held by, and all of our operations are conducted by, Tanger Properties Limited Partnership and subsidiaries. The Company owns the majority of the units of partnership interest issued by the Operating Partnership, through its two wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust. Tanger GP Trust controls the Operating Partnership as its sole general partner. Tanger LP Trust holds a limited partnership interest. Through May 31, 2011, the Tanger family, through its ownership of the Tanger Family Limited Partnership held the remaining units as a limited partner. On June 1, 2011, the Tanger Family Limited Partnership was dissolved, and the units of the Operating Partnership owned by the Tanger Family Limited Partnership were distributed to the individual Family Limited Partners. As a result, each such Family Limited Partner became an individual limited partner of the Operating Partnership.

As of December 31, 2012, the Company, through its ownership of the Tanger GP and Tanger LP Trusts, owned 23,515,346 units of the Operating Partnership and the Family Limited Partners owned the remaining 1,190,466 units. Each unit held by the Family Limited Partners is exchangeable for four of the Company's common shares, subject to certain limitations to preserve the Company's REIT status.

Ownership of the Company's common shares is restricted to preserve the Company's status as a REIT for federal income tax purposes. Subject to certain exceptions, a person may not actually or constructively own more than 4% of our common shares. We also operate in a manner intended to enable us to preserve our status as a REIT, including, among other things, making distributions with respect to our outstanding common shares equal to at least 90% of our taxable income each year.

The Company is a North Carolina corporation and the Operating Partnership is a North Carolina partnership, and both were formed in 1993. Our executive offices are currently located at 3200 Northline Avenue, Suite 360, Greensboro, North Carolina, 27408 and our telephone number is (336) 292-3010. Our website can be accessed at www.tangeroutlet.com. A copy of our 10-Ks, 10-Qs, 8-Ks and any amendments thereto can be obtained, free of charge, on our website as soon as reasonably practicable after we file such material with, or furnish it to, the Securities and Exchange Commission (the "SEC"). The information found on, or otherwise accessible through, our website is not incorporated into, and does not form a part of, this annual report on Form 10-K or any other report or document we file with or furnish to the SEC.


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Recent Developments

Joint Venture Center Openings

Galveston/Houston, Texas

In June 2011, we announced the formation of a joint venture for the development of a Tanger Outlet Center south of Houston in Texas City, Texas. The center grand opening occurred on October 19, 2012 and features over 85 brand name and designer outlet stores in the first phase of approximately 353,000 square feet, with room for expansion for a total build out of approximately 470,000 square feet. As of December 31, 2012, we and our partner had each contributed $35.3 million in cash to the joint venture to fund development activities. We provide property management and marketing services to the center; and with our partner, are jointly providing development and leasing services.

Westgate, Glendale, Arizona

In May 2012, we formed a joint venture for the development of a Tanger Outlet Center in Glendale, Arizona. The center grand opening occurred on November 15, 2012 and features over 80 brand name and designer outlet stores in the first phase of approximately 332,000 square feet, with room for expansion for a total build out of approximately 410,000 square feet. As of December 31, 2012, we had contributed $19.4 million in cash to the joint venture to fund development activities. We are providing property management, construction supervision, leasing and marketing services to the joint venture. In June 2012, the joint venture closed on a construction loan with the ability to borrow up to $48.3 million, which carries an interest rate of LIBOR + 1.75%. As of December 31, 2012, the balance on the construction loan was $32.0 million.

Joint Venture Acquisitions

RioCan Canadian Joint Venture

In November 2012, through our 50/50 co-ownership agreement with RioCan Real Estate Investment Trust, we acquired two existing outlet centers in the Montreal, Quebec market for an aggregate purchase price of approximately $94.8 million. RioCan is providing development and property management services and we are providing leasing and marketing services. The purchase price includes the assumption of mortgages totaling $18.7 million at Les Factoreries Saint-Sauveur, which carry a contractual, weighted average interest rate of 5.7% and mature in 2015 and 2020. There is no in-place financing associated with the Bromont Outlet Mall acquisition.

Les Factoreries St. Sauveur, is located northwest of Montreal adjacent to Highway 15 in the town of Saint-Sauveur, Quebec. The property was built in 1980, expanded in 2006, and contains approximately 116,000 square feet with the potential to expand to approximately 131,000 square feet. This outlet center features many national brands such as, Nike, Tommy Hilfiger, Reebok, Guess, Jones New York, Naturalizer and Parasuco.

The Bromont Outlet Mall, is located east of Montreal near the eastern townships adjacent to Highway 10 in the town of Bromont, Quebec. The property was built in 2004, expanded through 2011, and contains approximately 163,000 square feet with the potential to expand to approximately 251,000 square feet. This outlet center features many national brands such as, Point Zero, Tommy Hilfiger, Guess, Puma, Mexx, and Urban Planet. Bromont is located at the base of Mont Brome.

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Joint Venture Development Update

National Harbor, Washington, D.C. Metro Area

In May 2011, we announced the formation of a joint venture for the development of a Tanger Outlet Center at National Harbor in the Washington, D.C. Metro area. National Harbor includes restaurants, retail, office and residences, and a number of hotels including the Gaylord National Resort and Convention Center. The planned Tanger Outlet Center is expected to contain approximately 80 brand name and designer outlet stores in a center measuring up to 340,000 square feet. In November 2012, the joint venture broke ground and began site development. Both parties have made initial equity contributions of $2.6 million to fund certain pre-development costs. In February 2013, the joint venture executed a term sheet for a three year construction loan with the ability to borrow up to $61.0 million, which carries an interest rate of LIBOR + 1.65%. The joint venture currently expects to close on the loan by the end of April 2013. We will provide property management, leasing and marketing services to the joint venture; and with our partner, will jointly provide site development and construction supervision services.

Other Potential Future Developments

As of the date of this filing, we are in the initial study period for potential new developments, including sites located in Charlotte, North Carolina; Columbus, Ohio; Foxwoods Resort Casino in Mashantucket, Connecticut; Scottsdale, Arizona; Toronto, Ontario and Ottawa, Ontario. The Charlotte and Columbus sites, if developed, will be undertaken by joint ventures formed with Simon Properties Group. The Ottawa and Toronto sites, if developed, will be undertaken by our RioCan joint venture (see discussion under the caption "RioCan Canadian Joint Venture" in the section titled "Off-Balance Sheet Arrangements"). We may also use joint venture arrangements to develop other potential sites. There can be no assurance, however, that these potential future developments will ultimately be developed.

In the case of projects to be wholly-owned by us, we expect to fund these projects from amounts available under our unsecured lines of credit, but may also fund them with capital from additional public debt and equity offerings. For projects to be developed through joint venture arrangements, we typically use collateralized construction loans to fund a portion of the project, with our share of the equity requirements funded from sources described above.

Financing Transactions

$250.0 Million Unsecured Term Loan

In February 2012, the Operating Partnership closed on a seven-year $250.0 million unsecured term loan. The term loan is interest only, matures in the first quarter of 2019 and is pre-payable without penalty beginning in the first quarter of 2015. Based on our current credit ratings, the loan has an initial interest rate of LIBOR + 1.80%. We used the net proceeds of the term loan to reduce the outstanding balances on our $520.0 million unsecured lines of credit.

William G. Benton Appointed Non-Executive Chairman of the Board of Directors

Effective January 1, 2013, Jack Africk, a board member since 1993, resigned his position as Non-Executive Chairman of the Board of Directors but remains Chairman Emeritus and an active member of the Board of Directors. Also effective January 1, 2013, William G. Benton, who has also been a member of our Board since 1993, replaced Mr. Africk as Non-Executive Chairman of the Board of Directors and Thomas J. Reddin, a board member since 2010, replaced Mr. Benton as Chairman of the Audit Committee.


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The Outlet Concept

Outlets are stores operated by manufacturers and brand name retailers that sell primarily first quality, branded products to consumers at significant discounts from regular retail prices charged by department stores and specialty stores. Outlet centers offer advantages to manufacturers and brand name retailers as they are often able to charge customers lower prices for brand name and designer products by eliminating the third party retailer. Outlet centers also typically have lower operating costs than other retailing formats, which enhance their profit potential. Outlet centers enable them to optimize the size of production runs while continuing to maintain control of their distribution channels.

We believe that outlet centers will continue to present attractive opportunities for capital investment in the long-term. We further believe, based upon our contacts with present and prospective tenants that many companies will continue to utilize the outlet concept as a profitable distribution vehicle. However, due to present economic conditions and the potential for increased competition from other developers announcing plans to develop outlet centers, new developments or expansions may not provide an initial return on investment as high as has been historically achieved.

Our Outlet Centers

Each of our outlet centers carries the Tanger brand name. We believe that our tenants and consumers recognize the Tanger brand as one that provides outlet shopping centers where consumers can trust the brand, quality and price of the merchandise they purchase directly from the manufacturers and brand name retailers.

As one of the original participants in this industry, we have developed long-standing relationships with many of our tenants. Because of our established relationships, we believe we are well positioned for the long-term.

Our outlet centers range in size from 24,619 to 729,734 square feet and are typically located at least 10 miles from major department stores and manufacturer-owned, full-price retail stores. Historically, manufacturers prefer these locations so that they do not compete directly with their major customers and their own stores. Many of our outlet centers are located near tourist destinations to attract tourists who consider shopping to be a recreational activity. Additionally, our centers are often situated in close proximity to interstate highways that provide accessibility and visibility to potential customers.

We have a diverse tenant base comprised of approximately 400 different well-known, upscale, national designer or brand name concepts, such as Ann Taylor, Banana Republic, Brooks Brothers, Calvin Klein, Coach Leatherware, Eddie Bauer, GAP, J. Crew, Juicy, Kate Spade, Lucky Brand Jeans, Michael Kors, Nike, Old Navy, Polo Ralph Lauren, Saks Fifth Avenue - Off Fifth, Tommy Hilfiger, Under Armour and others.

No single tenant, including all of its store concepts, accounted for 10% or more of our combined base and percentage rental revenues during 2012, 2011 or 2010. As of December 31, 2012, no single tenant accounted for more than 7.9% of our leasable square feet or 6.4% of our combined base and percentage rental revenues. Because our typical tenant is a large, national manufacturer, we generally do not experience any material losses with respect to rent collections or lease defaults.

Only small portions of our revenues are dependent on contingent revenue sources. Revenues from fixed rents and operating expense reimbursements accounted for approximately 90% of our total revenues in 2012. Revenues from contingent sources, such as percentage rents, vending income and miscellaneous income, accounted for approximately 10% of our total revenues in 2012.

Business History

Stanley K. Tanger, the Company's founder, entered the outlet center business in 1981. Prior to founding our company, Stanley K. Tanger and his son, Steven B. Tanger, our President and Chief Executive Officer, built and managed a successful family owned apparel manufacturing business, Tanger/Creighton, Inc., which included the operation of five outlet stores. Based on their knowledge of the apparel and retail industries, as well as their experience operating Tanger/Creighton, Inc.'s outlet stores, they recognized that there would be a demand for outlet centers where a number of manufacturers could operate in a single location and attract a large number of shoppers.


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Steven B. Tanger joined the Company in 1986, and by June 1993, the Tangers had developed 17 centers totaling approximately 1.5 million square feet. In June 1993, we completed our initial public offering, making Tanger Factory Outlet Centers, Inc. the first publicly traded outlet center company. Since our initial public offering, we have grown our portfolio through the strategic development, expansion and acquisition of outlet centers and are now one of the largest owner operators of outlet centers in the United States and Canada.

Business Strategy

Our company has been built on a firm foundation of strong and enduring business relationships coupled with conservative business practices. We partner with many of the world's best known and most respected retailers and manufacturers. By fostering and maintaining strong tenant relationships with these successful, high volume companies, we have been able to solidify our position as a leader in the outlet industry for well over a quarter century. The confidence and trust that we have developed with our retail partners from the very beginning has allowed us to forge the impressive retail alliances that we enjoy today with approximately 400 brand name retailers and manufacturers.

We have had a solid track record of success in the outlet industry for the past 32 years. In 1993, Tanger led the way by becoming the industry's first outlet center company to be publicly traded. Our seasoned team of real estate professionals utilize the knowledge and experience that we have gained to give us a competitive advantage in the outlet business.

As of December 31, 2012, our consolidated outlet centers were 99% occupied with average tenant sales of $376 per square foot. Our portfolio of properties has had an average occupancy rate of 95% or greater on December 31st of each year since 1981. We believe our ability to achieve this level of performance is a testament to our long-standing tenant relationships, industry experience and our expertise in the development and operation of outlet centers.

Growth Strategy

Our goal is to build shareholder value through a comprehensive, conservative plan for sustained, long-term growth. We focus our efforts on increasing rents in our existing centers, renovating and expanding our mature centers and reaching new markets through ground-up developments or acquisitions of existing outlet centers. We expect new development to continue to be important to the growth of our portfolio in the long-term. Future centers may be wholly-owned by us or developed through joint venture arrangements.

Increasing Rents at Existing Centers

Our leasing team focuses on the marketing of available space to maintain our standard for high occupancy levels. Leases are negotiated to provide for inflation-based contractual rent increases or periodic fixed contractual rent increases and percentage rents. Due to the overall high performance of our shopping centers, we have historically been able to renew leases at higher base rents per square-foot and attract stronger, more popular brands to replace underperforming tenants.

Developing New Centers

We believe that there continue to be opportunities to introduce the Tanger brand in untapped or under-served markets across the United States and Canada in the long-term. We believe our 32 years of outlet industry experience, extensive development expertise and strong retail relationships give us a distinct competitive advantage.

In order to identify new markets across North America, we follow a general set of guidelines when evaluating opportunities for the development of new centers. This typically includes seeking locations within markets that have at least 1 million people residing within a 30 to 40 mile radius with an average household income of at least $65,000 per year, frontage on a major interstate or roadway that has excellent visibility and a traffic count of at least 55,000 cars per day. Leading tourist, vacation and resort markets that receive at least 5 million visitors annually are also closely evaluated. Although our current goal is to target sites that are large enough to support centers with approximately 90 stores totaling at least 350,000 square feet, we maintain the flexibility to vary our minimum requirements based on the unique characteristics of a site, tenant demand and our prospects for future growth and success.


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In order to help ensure the viability of proceeding with a project, we gauge the interest of our retail partners first. We typically prefer that at least 50% of the space in each center is pre-leased prior to acquiring the site and beginning construction; however, we may occasionally proceed with construction with less than 50% of the space pre-leased under certain circumstances. This pre-leasing policy is consistent with our conservative financing perspective and the discipline we impose upon ourselves. Construction of a new outlet center has typically taken us nine to twelve months from groundbreaking to the opening of the first tenant stores.

Expanding and Renovating Existing Centers

Keeping our shopping centers vibrant and growing is a key part of our formula for success. In order to maintain our reputation as the premiere outlet shopping destination in the markets that we serve, we have an ongoing program of renovations and expansions taking place at our outlet centers. Construction for expansion and renovation to existing properties typically takes less time, usually between six to nine months depending on the scope of the project.

Acquiring Centers

As a means of creating a presence in key markets and to create shareholder value, we may selectively choose to acquire individual properties or portfolios of properties that meet our strategic investment criteria. We believe that our extensive experience in the outlet center business, access to capital markets, familiarity with real estate markets and our management experience will allow us to evaluate and execute our acquisition strategy successfully over time. Through our tenant relationships, our leasing professionals have the ability to implement a remerchandising strategy when needed to increase occupancy rates and value. We believe that our managerial skills, marketing expertise and overall outlet industry experience will also allow us to add long-term value and viability to these centers.

Operating Strategy

Increasing cash flow to enhance the value of our properties and operations remains a primary business objective. Through targeted marketing and operational efficiencies, we strive to improve sales and profitability of our tenants and our outlet centers as a whole. Achieving higher base and percentage rents and generating additional income from temporary leasing, vending and other sources also remains an important focus and goal.

Leasing

The long-standing retailer relationships that we enjoy allow us the ability to provide our shoppers with a collection of the world's most popular outlet stores. Tanger customers shop and save on their favorite brand name merchandise including men's, women's and children's ready-to-wear, lifestyle apparel, footwear, jewelry and accessories, tableware, housewares, luggage and domestic goods. In order for our centers to perform at a high level, our leasing professionals continually monitor and evaluate tenant mix, store size, store location and sales performance. They also work to assist our tenants through re-sizing and re-location of retail space within each of our centers for maximum sales of each retail unit across our portfolio.

Marketing
 
Our marketing plans deliver compelling, well-crafted messages and enticing promotions and events to targeted audiences for tangible, meaningful and measurable results. Our plans are based on a basic measure of success - increase sales and traffic for our retail partners and we will create successful centers. Utilizing a strategic mix of print, radio, television, direct mail, website, internet advertising, social networks, smart phone applications and public relations, we consistently reinforce the Tanger brand. Our marketing efforts are also designed to build loyalty with current Tanger shoppers and create awareness with potential customers. The majority of consumer-marketing expenses incurred by us are reimbursable by our tenants.


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Capital Strategy

We believe we achieve a strong and flexible financial position by attempting to: (1) maintain a conservative leverage position relative to our portfolio when pursuing new development, expansion and acquisition opportunities, (2) extend and sequence debt maturities, (3) manage our interest rate risk through a proper mix of fixed and variable rate debt, (4) maintain access to liquidity by using our lines of credit in a conservative manner and (5) preserve internally generated sources of capital by strategically divesting of our underperforming assets and maintaining a conservative distribution payout ratio. We manage our capital structure to reflect a long-term investment approach and utilize multiple sources of capital to meet our requirements.

We intend to retain the ability to raise additional capital, including public debt or equity, to pursue attractive investment opportunities that may arise and to otherwise act in a manner that we believe to be in the best interests of our shareholders and unit holders. The Company is a well-known seasoned issuer with a shelf registration that allows us to register unspecified amounts of different classes of securities on Form S-3. To generate capital to reinvest into other attractive investment opportunities, we may also consider the use of additional operational and developmental joint ventures, the sale or lease of outparcels on our existing properties and the sale of certain properties that do not meet our long-term investment criteria. Based on cash provided by operations, existing lines of credit, ongoing relationships with certain financial institutions and our ability to sell debt or issue equity subject to market conditions, we believe that we have access to the necessary financing to fund our planned capital expenditures during 2013.
 
We anticipate that adequate cash will be available to fund our operating and administrative expenses, regular debt service obligations, and the payment of dividends in accordance with REIT requirements in both the short and long-term. Although we receive most of our rental payments on a monthly basis, distributions to shareholders and unitholders are made quarterly and interest payments on the senior, unsecured notes are made semi-annually. Amounts accumulated for such payments will be used in the interim to reduce the outstanding borrowings under our existing lines of credit or invested in short-term money market or other suitable instruments adhering to our investment policies.

We believe our current balance sheet position is financially sound; however, due to the uncertainty and unpredictability of the capital and credit markets, we can give no assurance that affordable access to capital will exist between now and 2015 when our next significant debt maturities occur. As a result, our current primary focus is to continually strengthen our capital and liquidity position by controlling and reducing construction and overhead costs, generating positive cash flows from operations to cover our distributions and reducing outstanding debt.

Competition

We carefully consider the degree of existing and planned competition in a proposed area before deciding to develop, acquire or expand a new center. Our centers compete for customers primarily with outlet centers built and operated by different developers, traditional shopping malls and full- and off-price retailers. However, we believe that the majority of our customers visit outlet centers because they are intent on buying name-brand products at discounted prices. Traditional full- and off-price retailers are often unable to provide such a variety of name-brand products at attractive prices.

Tenants of outlet centers typically avoid direct competition with major retailers and their own specialty stores, and, therefore, generally insist that the outlet centers be located not less than 10 miles from the nearest major department store or the tenants' own specialty stores. For this reason, our centers compete only to a very limited extent with traditional malls in or near metropolitan areas.

We compete with institutional pension funds, private equity investors, other REITs, small owners of outlet centers, specialty stores and others who are engaged in the acquisition, development or ownership of outlet centers and stores. In addition, the number of entities competing to acquire or develop outlet centers has increased and may continue to increase in the future, which could increase demand for these outlet centers and the prices we must pay to acquire or develop them. Nevertheless, we believe the high barriers to entry in the outlet industry, including the need for extensive relationships with premier manufacturers and brand name retailers, will continue to minimize the number of new outlet centers developed each year.


11



Corporate and Regional Headquarters

We rent space in an office building in Greensboro, North Carolina in which our corporate headquarters is located. In addition, we rent a regional office in New York City, New York to better service our principal fashion-related tenants, many of whom are based in and around that area.

We maintain offices and employ on-site managers at 38 centers. The managers closely monitor the operation, marketing and local relationships at each of their centers.

Insurance

We believe that as a whole our properties are covered by adequate comprehensive liability, fire, flood, earthquake and extended loss insurance provided by reputable companies with commercially reasonable and customary deductibles and limits. Northline Indemnity, LLC, ("Northline"), a wholly-owned captive insurance subsidiary of the Operating Partnership, is responsible for losses up to certain levels for property damage (including wind damage from hurricanes) prior to third-party insurance coverage. Specified types and amounts of insurance are required to be carried by each tenant under their lease agreement with us. There are however, types of losses, like those resulting from wars or nuclear radiation, which may either be uninsurable or not economically insurable in some or all of our locations. An uninsured loss could result in a loss to us of both our capital investment and anticipated profits from the affected property.

Employees

As of February 1, 2013, we had 265 full-time employees, located at our corporate headquarters in North Carolina, our regional office in New York and 38 business offices. At that date, we also employed 277 part-time employees at various locations.

Item 1A.
Risk Factors

Risks Related to Real Estate Investments

We may be unable to develop new outlet centers or expand existing outlet centers successfully.

We continue to develop new outlet centers and expand existing outlet centers as opportunities arise. However, there are significant risks associated with our development activities in addition to those generally associated with the ownership and operation of established retail properties. While we have policies in place designed to limit the risks associated with development, these policies do not mitigate all development risks associated with a project. These risks include the following:

significant expenditure of money and time on projects that may be delayed or never be completed;

higher than projected construction costs;

shortage of construction materials and supplies;

failure to obtain zoning, occupancy or other governmental approvals or to the extent required, tenant approvals; and

late completion because of construction delays, delays in the receipt of zoning, occupancy and other approvals or other factors outside of our control.

Any or all of these factors may impede our development strategy and adversely affect our overall business.


12



The economic performance and the market value of our outlet centers are dependent on risks associated with real property investments.

Real property investments are subject to varying degrees of risk. The economic performance and values of real estate may be affected by many factors, including changes in the national, regional and local economic climate, inflation, unemployment rates, consumer confidence, local conditions such as an oversupply of space or a reduction in demand for real estate in the area, the attractiveness of the properties to tenants, competition from other available space, our ability to provide adequate maintenance and insurance and increased operating costs.

Real property investments are relatively illiquid.

Our outlet centers represent a substantial portion of our total consolidated assets. These assets are relatively illiquid. As a result, our ability to sell one or more of our outlet centers in response to any changes in economic or other conditions is limited. If we want to sell an outlet center, there can be no assurance that we will be able to dispose of it in the desired time period or that the sales price will exceed the cost of our investment.

Properties may be subject to impairment charges which can adversely affect our financial results.

We periodically evaluate long-lived assets to determine if there has been any impairment in their carrying values and record impairment losses if the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts or if there are other indicators of impairment.  If it is determined that an impairment has occurred, we would be required to record an impairment charge equal to the excess of the asset's carrying value over its estimated fair value, which could have a material adverse effect on our financial results in the accounting period in which the adjustment is made.  Our estimates of undiscounted cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, but not limited to, demand for space, competition for tenants, changes in market rental rates and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter our assumptions, the future cash flows estimated in our impairment analysis may not be achieved.

We face competition for the acquisition and development of outlet centers, and we may not be able to complete acquisitions or developments that we have identified.

We intend to grow our business in part through acquisitions and new developments. We compete with institutional pension funds, private equity investors, other REITs, small owners of outlet centers, specialty stores and others who are engaged in the acquisition, development or ownership of outlet centers and stores. These competitors may succeed in acquiring or developing outlet centers themselves. Also, our potential acquisition targets may find our competitors to be more attractive acquirers because they may have greater marketing and financial resources, may be willing to pay more, or may have a more compatible operating philosophy. In addition, the number of entities competing to acquire or develop outlet centers has increased and may continue to increase in the future, which could increase demand for these outlet centers and the prices we must pay to acquire or develop them. If we pay higher prices for outlet centers, our profitability may be reduced. Also, once we have identified potential acquisitions, such acquisitions are subject to the successful completion of due diligence, the negotiation of definitive agreements and the satisfaction of customary closing conditions. We cannot assure you that we will be able to reach acceptable terms with the sellers or that these conditions will be satisfied.

We may be subject to environmental regulation.

Under various federal, state and local laws, ordinances and regulations, we may be considered an owner or operator of real property and may be responsible for paying for the disposal or treatment of hazardous or toxic substances released on or in our property or disposed of by us, as well as certain other potential costs which could relate to hazardous or toxic substances (including governmental fines and injuries to persons and property). This liability may be imposed whether or not we knew about, or were responsible for, the presence of hazardous or toxic substances.


13



Risks Related to our Business

Our earnings and therefore our profitability are entirely dependent on rental income from real property.

Substantially all of our income is derived from rental income from real property. Our income and funds for distribution would be adversely affected if a significant number of our tenants were unable to meet their obligations to us or if we were unable to lease a significant amount of space in our centers on economically favorable lease terms. In addition, the terms of outlet store tenant leases traditionally have been significantly shorter than in other retail segments. There can be no assurance that any tenant whose lease expires in the future will renew such lease or that we will be able to re-lease space on economically favorable terms.

We are substantially dependent on the results of operations of our retailers.

Our operations are subject to the results of operations of our retail tenants. A portion of our rental revenues are derived from percentage rents that directly depend on the sales volume of certain tenants. Accordingly, declines in these tenants' results of operations would reduce the income produced by our properties. If the sales of our retail tenants decline sufficiently, such tenants may be unable to pay their existing rents as such rents would represent a higher percentage of their sales. Any resulting leasing delays, failures to make payments or tenant bankruptcies could result in the termination of such tenants' leases.

A number of companies in the retail industry, including some of our tenants, have declared bankruptcy or have voluntarily closed certain of their stores in recent years. The bankruptcy of a major tenant or number of tenants may result in the closing of certain affected stores, and we may not be able to re-lease the resulting vacant space for some time or for equal or greater rent. Such bankruptcy could have a material adverse effect on our results of operations and could result in a lower level of funds for distribution.

Certain of our properties are subject to ownership interests held by third parties, whose interests may conflict with ours and thereby constrain us from taking actions concerning these properties which otherwise would be in our best interests and our shareholders interests.

We own partial interests in seven outlet centers with various joint venture partners. The approval or consent of the other members of these joint ventures is required before we may sell, finance, expand or make other significant changes in the operations of these properties. We also may not have control over certain major decisions, including approval of the annual operating budgets, selection or termination of the property management company, leasing and the timing and amount of distributions, which could result in decisions that do not fully reflect our interests. To the extent such approvals or consents are required, we may experience difficulty in, or may be prevented from, implementing our plans and strategies with respect to expansion, development, property management, on-going operations, financing (for example, decisions as to whether to refinance or obtain financing, when and whether to pay down principal of any loan and whether and how to cure any defaults under loan documents) or other similar transactions with respect to such properties.

An uninsured loss or a loss that exceeds our insurance policies on our outlet centers or the insurance policies of our tenants could subject us to lost capital and revenue on those centers.

Some of the risks to which our outlet centers are subject, including risks of war and earthquakes, hurricanes and other natural disasters, are not insurable or may not be insurable in the future. Should a loss occur that is uninsured or in an amount exceeding the combined aggregate limits for the insurance policies noted above or in the event of a loss that is subject to a substantial deductible under an insurance policy, we could lose all or part of our capital invested in and anticipated revenue from one or more of our outlet centers, which could adversely affect our results of operations and financial condition, as well as our ability to make distributions to our shareholders.


14



Under the terms and conditions of our leases, tenants generally are required to indemnify and hold us harmless from liabilities resulting from injury to persons and contamination of air, water, land or property, on or off the premises, due to activities conducted in the leased space, except for claims arising from negligence or intentional misconduct by us or our agents. Additionally, tenants generally are required, at the tenant's expense, to obtain and keep in full force during the term of the lease, liability and property damage insurance policies issued by companies acceptable to us. These policies include liability coverage for bodily injury and property damage arising out of the ownership, use, occupancy or maintenance of the leased space. All of these policies may involve substantial deductibles and certain exclusions. Therefore, an uninsured loss or loss that exceeds the insurance policies of our tenants could also subject us to lost capital and revenue.

High fuel prices may impact consumer travel and spending habits.

Most shoppers use private automobile transportation to travel to our outlet centers and many of our centers are not easily accessible by public transportation. Increasing fuel costs may reduce the number of trips to our centers thus reducing the amount spent at our centers. Many of our outlet center locations near tourist destinations may experience an even more acute reduction of shoppers if there were a reduction of people opting to drive to vacation destinations. Such reductions in traffic could adversely impact our percentage rents and ability to renew and release space at current rental rates.

Increasing fuel costs may also reduce disposable income and decrease demand for retail products. Such a decrease could adversely affect the results of operations of our retail tenants and adversely impact our percentage rents and ability to renew and release space at current rental rates.

Risks Related to our Indebtedness and Financial Markets

We are subject to the risks associated with debt financing.

We are subject to the risks associated with debt financing, including the risk that the cash provided by our operating activities will be insufficient to meet required payments of principal and interest. Disruptions in the capital and credit markets may adversely affect our operations, including the ability to fund the planned capital expenditures and potential new developments or acquisitions. Further, there is the risk that we will not be able to repay or refinance existing indebtedness or that the terms of any refinancing will not be as favorable as the terms of existing indebtedness. If we are unable to access capital markets to refinance our indebtedness on acceptable terms, we might be forced to dispose of properties on disadvantageous terms, which might result in losses.

Risks Related to Federal Income Tax Laws

The Company's failure to qualify as a REIT could subject our earnings to corporate level taxation.

We believe that we have operated and intend to operate in a manner that permits the Company to qualify as a REIT under the Internal Revenue Code of 1986, as amended. However, we cannot assure you that the Company has qualified or will remain qualified as a REIT. If in any taxable year the Company were to fail to qualify as a REIT and certain statutory relief provisions were not applicable, the Company would not be allowed a deduction for distributions to shareholders in computing taxable income and would be subject to U.S. federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. The Company's failure to qualify for taxation as a REIT would have an adverse effect on the market price and marketability of our securities.


15



The Company is required by law to make distributions to our shareholders.

To obtain the favorable tax treatment associated with the Company's qualification as a REIT, generally, the Company is required to distribute to its shareholders at least 90% of its net taxable income (excluding capital gains) each year. The Company depends upon distributions or other payments from the Operating Partnership to make distributions to the Company's common shareholders. A recent IRS revenue procedure allows the Company to satisfy the REIT income distribution requirement by distributing up to 90% of the dividends on its common shares in the form of additional common shares in lieu of paying dividends entirely in cash. Although we reserve the right to utilize this procedure in the future, we currently have no intent to do so. In the event that the Company pays a portion of a dividend in shares, taxable U.S. shareholders would be required to pay income tax on the entire amount of the dividend, including the portion paid in shares, in which case such shareholders might have to pay the income tax using cash from other sources. If a U.S. shareholder sells the shares it receives as a dividend in order to pay this income tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our shares at the time of the sale.

Risks Related to our Organizational Structure

The Company depends on distributions from the Operating Partnership to meet its financial obligations, including dividends.

The Company's operations are conducted by the Operating Partnership, and the Company's only significant asset is its interest in the Operating Partnership. As a result, the Company depends upon distributions or other payments from the Operating Partnership in order to meet its financial obligations, including its obligations under any guarantees or to pay dividends or liquidation payments to its common shareholders. As a result, these obligations are effectively subordinated to existing and future liabilities of the Operating Partnership. The Operating Partnership is a party to loan agreements with various bank lenders that require the Operating Partnership to comply with various financial and other covenants before it may make distributions to the Company. Although the Operating Partnership presently is in compliance with these covenants, there is no assurance that the Operating Partnership will continue to be in compliance and that it will be able to make distributions to the Company.

Risks Related to Cyber Security

Cyber-attacks or acts of cyber-terrorism could disrupt our business operations and information technology systems or result in the loss or exposure of confidential or sensitive customer, employee or Company information.

Our business operations and information technology systems may be vulnerable to an attack by individuals or organizations intending to disrupt our business operations and information technology systems. We use such systems to manage our outlet centers and other business processes. Disruption of those systems could adversely impact our ability to operate our business and to serve our customers timely. Accordingly, if such an attack or act of terrorism were to occur, our operations and financial results could be adversely affected. In addition, we use our information technology systems to protect confidential or sensitive customer, employee and Company information developed and maintained in the normal course of our business. Any attack on such systems that would result in the unauthorized release of customer, employee or other confidential or sensitive data could have a material adverse effect on our business reputation, increase our costs and expose us to additional material legal claims and liability. As a result, if such an attack or act of terrorism were to occur, our operations and financial results could be adversely affected.

Item 1B.
Unresolved Staff Comments

There are no unresolved staff comments from the Commission for either the Company or the Operating Partnership.


16



Item 2.
Properties

As of February 1, 2013, our consolidated portfolio consisted of 36 outlet centers totaling 10.7 million square feet located in 24 states. We own interests in seven other outlet centers totaling approximately 2.2 million square feet through unconsolidated joint ventures, including three outlet centers in Canada. Our centers range in size from 24,619 to 729,734 square feet. The centers are generally located near tourist destinations or along major interstate highways to provide visibility and accessibility to potential customers.

We believe that the centers are well diversified geographically and by tenant and that we are not dependent upon any single property or tenant. No one property represents 10% or more of our consolidated total revenues for the year ended December 31, 2012 or 10% or more of our consolidated total assets as of December 31, 2012.

We have an ongoing strategy of acquiring centers, developing new centers and expanding existing centers. See “Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources” for a discussion of the cost of such programs and the sources of financing thereof.

Of the 36 outlet centers in our consolidated portfolio, we own the land underlying 30 and have ground leases on six. The following table sets forth information about the land leases on which all or a portion of the six centers are located:
Outlet Center
 
Acres
 
Expiration
 
Expiration including renewal terms
Myrtle Beach Hwy 17, SC
 
40.0

 
2027
 
2096
Atlantic City, NJ
 
21.3

 
2101
 
2101
Ocean City, MD
 
18.5

 
2084
 
2084
Sevierville, TN
 
41.6

 
2086
 
2086
Riverhead, NY
 
47.0

 
2014
 
2039
Rehoboth Beach, DE
 
2.7

 
2044
 
(1) 
(1)
Lease may be renewed at our option for additional terms of twenty years each.

Generally, our leases with our outlet center tenants typically have an initial term that ranges from 5 to 10 years and provide for the payment of fixed monthly rent in advance. There are often contractual base rent increases during the initial term of the lease. In addition, the rental payments are customarily subject to upward adjustments based upon tenant sales volume. Most leases provide for payment by the tenant of real estate taxes, insurance, common area maintenance, advertising and promotion expenses incurred by the applicable center. As a result, the majority of our operating expenses for the centers are borne by the tenants.


17



The following table summarizes certain information with respect to our consolidated outlet centers as of February 1, 2013.
State
 
Number of
Centers
 
Square
Feet
 
%
of Square Feet
South Carolina
 
5

 
1,576,873

 
15
Pennsylvania
 
3

 
874,422

 
8
New York
 
1

 
729,734

 
7
Georgia
 
2

 
691,582

 
6
Texas
 
2

 
619,729

 
6
Delaware
 
1

 
568,975

 
5
Alabama
 
1

 
557,228

 
5
North Carolina
 
3

 
505,225

 
5
New Jersey
 
1

 
489,762

 
4
Michigan
 
2

 
437,222

 
4
Tennessee
 
1

 
419,038

 
4
Ohio
 
1

 
411,776

 
4
Missouri
 
1

 
302,922

 
3
Utah
 
1

 
298,391

 
3
Connecticut
 
1

 
289,898

 
3
Iowa
 
1

 
277,230

 
3
Oregon
 
1

 
270,212

 
2
Louisiana
 
1

 
270,208

 
2
Illinois
 
1

 
250,439

 
2
New Hampshire
 
1

 
245,698

 
2
Florida
 
1

 
198,877

 
2
Maryland
 
1

 
197,707

 
2
California
 
1

 
171,300

 
2
Maine
 
2

 
82,286

 
1
Total
 
36

 
10,736,734

 
100


18



The following table summarizes certain information with respect to our existing outlet centers in which we have an ownership interest as of February 1, 2013. Except as noted, all properties are fee owned.
Location
 
Square Feet
 
% Occupied
Consolidated Outlet Centers
 
 
 
 
Riverhead, New York (1)
 
729,734

 
99
%
Rehoboth Beach, Delaware (1)
 
568,975

 
99
%
Foley, Alabama
 
557,228

 
96
%
Atlantic City, New Jersey (1)
 
489,762

 
93
%
San Marcos, Texas
 
441,929

 
100
%
Myrtle Beach Hwy 501, South Carolina
 
425,247

 
97
%
Sevierville, Tennessee (1)
 
419,038

 
99
%
Jeffersonville, Ohio
 
411,776

 
100
%
Myrtle Beach Hwy 17, South Carolina (1)
 
402,791

 
100
%
Washington, Pennsylvania
 
372,972

 
100
%
Commerce II, Georgia
 
370,512

 
100
%
Charleston, South Carolina
 
365,107

 
99
%
Howell, Michigan
 
324,652

 
96
%
Locust Grove, Georgia
 
321,070

 
100
%
Mebane, North Carolina
 
318,910

 
100
%
Branson, Missouri
 
302,922

 
99
%
Park City, Utah
 
298,391

 
100
%
Westbrook, Connecticut
 
289,898

 
99
%
Williamsburg, Iowa
 
277,230

 
97
%
Lincoln City, Oregon
 
270,212

 
98
%
Gonzales, Louisiana
 
270,208

 
100
%
Lancaster, Pennsylvania
 
254,002

 
100
%
Tuscola, Illinois
 
250,439

 
91
%
Hershey, Pennsylvania
 
247,448

 
100
%
Tilton, New Hampshire
 
245,698

 
100
%
Hilton Head II, South Carolina
 
206,529

 
100
%
Fort Myers, Florida
 
198,877

 
94
%
Ocean City, Maryland (1)
 
197,707

 
91
%
Terrell, Texas
 
177,800

 
96
%
Hilton Head I, South Carolina
 
177,199

 
98
%
Barstow, California
 
171,300

 
93
%
West Branch, Michigan
 
112,570

 
96
%
Blowing Rock, North Carolina
 
104,154

 
97
%
Nags Head, North Carolina
 
82,161

 
100
%
Kittery I, Maine
 
57,667

 
100
%
Kittery II, Maine
 
24,619

 
100
%
Total
 
10,736,734

 
98
%
(1)    These properties or a portion thereof are subject to a ground lease.

 


19



Location
 
Square Feet
 
% Occupied
Unconsolidated joint venture properties
 
 
 
 
Deer Park, NY (1) (33.3% owned)
 
741,981

 
93
%
Texas City, TX (50% owned)
 
352,705

 
97
%
Glendale, AZ (58% owned)
 
332,234

 
94
%
Wisconsin Dells, WI (50% owned)
 
265,086

 
98
%
Bromont, QC (2) (50% owned)
 
162,943

 
89
%
Cookstown, ON (3) (50% owned)
 
155,522

 
97
%
Saint-Sauveur, QC (2) (50% owned)
 
116,097

 
100
%
Total
 
2,126,568

 
 
(1)
Excludes a 29,253 square foot warehouse adjacent to the shopping center.
(2)
Center acquired in November 2012, located in Quebec, Canada.
(3)
Center acquired in December 2011 and located in Ontario, Canada.


Lease Expirations

The following table sets forth, as of February 1, 2013, scheduled lease expirations for our consolidated outlet centers, assuming none of the tenants exercise renewal options.
Year
 
No. of Leases Expiring
 
Approx. (1)  Square Feet
 
Average Annualized Base Rent per sq. ft
 
Annualized Base Rent (2)
 
% of Gross Annualized Base Rent Represented by Expiring Leases
2013
 
238

 
930

 
$
21.18

 
$
19,696

 
9
%
2014
 
330

 
1,463

 
18.82

 
27,536

 
13
%
2015
 
312

 
1,359

 
20.59

 
27,983

 
13
%
2016
 
327

 
1,426

 
20.80

 
29,665

 
14
%
2017
 
291

 
1,413

 
21.32

 
30,121

 
14
%
2018
 
198

 
1,064

 
22.66

 
24,112

 
11
%
2019
 
69

 
291

 
26.34

 
7,664

 
4
%
2020
 
109

 
594

 
18.18

 
10,797

 
5
%
2021
 
159

 
825

 
21.41

 
17,665

 
8
%
2022
 
132

 
488

 
28.36

 
13,838

 
6
%
2023 & thereafter
 
59

 
324

 
19.67

 
6,373

 
3
%
 
 
2,224

 
10,177

 
$
21.17

 
$
215,450

 
100
%
(1)
Excludes leases that have been entered into but which tenant has not yet taken possession, vacant suites, space under construction, temporary leases and month-to-month leases totaling in the aggregate approximately 560,000 square feet.
(2)
Annualized base rent is defined as the minimum monthly payments due as of February 1, 2013 annualized, excluding periodic contractual fixed increases and rents calculated based on a percentage of tenants' sales. The annualized base rent disclosed in the table above includes all concessions, abatements and reimbursements of rent to tenants.


20



Rental and Occupancy Rates

The following table sets forth information regarding the expiring leases for our consolidated outlet centers during each of the last five calendar years.

 
 
Total Expiring
 
Renewed by Existing
Tenants
Year
 
Square Feet
 
% of
Total Center Square Feet (1)
 
Square Feet
 
% of
Expiring Square Feet
2012
 
1,814,000

 
17

 
1,536,000

 
85
2011
 
1,771,000

 
18

 
1,459,000

 
82
2010
 
1,460,000

 
16

 
1,217,000

 
83
2009
 
1,502,000

 
16

 
1,218,000

 
81
2008
 
1,350,000

 
16

 
1,103,000

 
82
(1) Represents the percentage of total square footage at the beginning of each year that is scheduled to expire during the respective year.

The following table sets forth the weighted average base rental rate increases per square foot on a straight-line basis (includes periodic, contractual fixed rent increases) for our consolidated outlet centers upon re-leasing stores that were turned over or renewed during each of the last five calendar years.
 
 
Renewals of Existing Leases
 
Stores Re-leased to New Tenants (1)
 
 
 
 
Average Annualized Base Rents
 
 
 
Average Annualized Base Rents
 
 
 
 
($ per sq. ft.)
 
 
 
($ per sq. ft.)
Year
 
Square Feet
 
Expiring
 
New
 
%
Increase
 
Square Feet
 
Expiring
 
New
 
% Increase
2012

 
1,536,000

 
$
18.70

 
$
21.75

 
16
 
450,000

 
$
20.60

 
$
31.72

 
54
2011

 
1,459,000

 
$
18.16

 
$
20.54

 
13
 
548,000

 
$
18.82

 
$
28.24

 
50
2010

 
1,217,000

 
$
18.00

 
$
19.65

 
9
 
432,000

 
$
19.21

 
$
24.18

 
26
2009

 
1,218,000

 
$
16.80

 
$
18.43

 
10
 
305,000

 
$
18.83

 
$
24.66

 
31
2008

 
1,103,000

 
$
17.29

 
$
20.31

 
17
 
492,000

 
$
18.03

 
$
25.97

 
44
(1)
The square footage released to new tenants for 2012, 2011, 2010, 2009 and 2008 contains 137,000, 172,000, 91,000, 73,000 and 139,000 square feet, respectively, that was released to new tenants upon expiration of an existing lease during the current year.


21



Occupancy Costs

We believe that our ratio of average tenant occupancy cost (which includes base rent, common area maintenance, real estate taxes, insurance, advertising and promotions) to average sales per square foot is low relative to other forms of retail distribution. The following table sets forth for tenants that report sales, for each of the last five years, tenant occupancy costs per square foot as a percentage of reported tenant sales per square foot for our consolidated outlet centers.

Year
 
Occupancy Costs as a
% of Tenant Sales
2012
 
8.4

2011
 
8.4

2010
 
8.3

2009
 
8.5

2008
 
8.2



22



Tenants

The following table sets forth certain information for our consolidated outlet centers with respect to our ten largest tenants and their store concepts as of February 1, 2013.
Tenant
 
Number
of Stores
 
Square Feet
 
% of Total
Square Feet
The Gap, Inc.:
 
 
 
 
 
 
Old Navy
 
23

 
348,196

 
3.2

GAP
 
31

 
289,293

 
2.7

Banana Republic
 
25

 
208,149

 
1.9

Gap Kids
 
1

 
7,887

 
0.1

 
 
80

 
853,525

 
7.9

Phillips-Van Heusen Corporation:
 
 
 
 
 
 
Bass Shoe
 
33

 
218,204

 
2.0

Tommy Hilfiger
 
28

 
187,672

 
1.8

Van Heusen
 
32

 
129,275

 
1.2

Calvin Klein, Inc.
 
13

 
74,857

 
0.7

Izod
 
23

 
62,192

 
0.6

     Tommy Kids
 
1

 
3,200

 
*

 
 
130

 
675,400

 
6.3

Dress Barn, Inc.:
 
 
 
 
 
 
Dress Barn
 
27

 
226,138

 
2.1

Lane Bryant
 
24

 
133,455

 
1.2

Justice
 
25

 
105,556

 
1.0

Maurice's
 
9

 
37,436

 
0.4

Dress Barn Woman
 
2

 
7,470

 
0.1

Dress Barn Petite
 
1

 
6,570

 
*

 
 
88

 
516,625

 
4.8

VF Outlet Inc.:
 
 
 
 
 
 
VF Outlet
 
9

 
218,763

 
2.1

Nautica Factory Stores
 
18

 
89,786

 
0.8

Timberland
 
11

 
55,193

 
0.5

Vans
 
4

 
12,000

 
0.1

 
 
42

 
375,742

 
3.5

Nike:
 
 
 
 
 
 
Nike
 
24

 
336,205

 
3.1

Converse
 
7

 
21,182

 
0.2

     Hurley
 
2

 
4,633

 
0.1

 
 
33

 
362,020

 
3.4

Adidas:
 
 
 
 
 
 
Reebok
 
25

 
202,477

 
1.9

Adidas
 
11

 
98,733

 
0.9

Rockport
 
5

 
14,106

 
0.1

 
 
41

 
315,316

 
2.9

ANN Inc.:
 
 
 
 
 
 
Loft
 
26

 
185,272

 
1.7

Ann Taylor
 
17

 
115,196

 
1.1

 
 
43

 
300,468

 
2.8

Polo Ralph Lauren:
 
 
 
 
 
 
Polo Ralph Lauren
 
27

 
278,851

 
2.6

Polo Jeans Outlet
 
1

 
5,000

 
0.1

Polo Ralph Lauren Children
 
1

 
3,000

 
*

 
 
29

 
286,851

 
2.7

Carter's:
 
 
 
 
 
 
OshKosh B'Gosh
 
29

 
140,335

 
1.3

Carter's
 
30

 
136,306

 
1.3

 
 
59

 
276,641

 
2.6

Hanesbrands Direct, LLC:
 
 
 
 
 
 
Hanesbrands
 
33

 
209,351

 
2.0

Champion
 
6

 
27,652

 
0.3

Socks Galore
 
3

 
4,360

 
*

 
 
42

 
241,363

 
2.3

 
 
 
 
 
 
 
Total of all tenants listed in table
 
587

 
4,203,951

 
39.2

* Less than 0.1%.

23



Item 3.
Legal Proceedings

We are subject to legal proceedings and claims that have arisen in the ordinary course of our business and have not been finally adjudicated. In our opinion, the ultimate resolution of these matters is not expected to have a material effect on our results of operations or financial condition.

Item 4.
Mine Safety Disclosures

Not applicable

EXECUTIVE OFFICERS OF TANGER FACTORY OUTLET CENTERS, INC.

The following table sets forth certain information concerning the Company's executive officers. The Operating Partnership does not have executive officers:

NAME
 
AGE
 
POSITION
Steven B. Tanger
 
64

 
Director, President and Chief Executive Officer
Frank C. Marchisello, Jr.
 
54

 
Executive Vice President - Chief Financial Officer
Thomas E. McDonough
 
55

 
Executive Vice President - Chief Operating Officer
Chad D. Perry
 
41

 
Executive Vice President - General Counsel and Secretary
Carrie A. Geldner
 
50

 
Senior Vice President - Chief Marketing Officer
Lisa J. Morrison
 
53

 
Senior Vice President - Leasing
James F. Williams
 
48

 
Senior Vice President - Controller
Virginia R. Summerell
 
54

 
Senior Vice President - Treasurer and Assistant Secretary
Manuel O. Jessup
 
57

 
Senior Vice President - Human Resources

The following is a biographical summary of the experience of our executive officers:

Steven B. Tanger. Mr. Tanger is a director of the Company and was named President and Chief Executive Officer effective January 1, 2009. Mr. Tanger served as President and Chief Operating Officer from January 1, 1995 to December 2008. Previously, Mr. Tanger served as Executive Vice President from 1986 to December 1994. He has been with Tanger related companies for most of his professional career, having served as Executive Vice President of Tanger/Creighton for 10 years. Mr. Tanger is a graduate of the University of North Carolina at Chapel Hill and the Stanford University School of Business Executive Program.

Frank C. Marchisello, Jr. Mr. Marchisello was named Executive Vice President - Chief Financial Officer in April 2003. Previously he was named Senior Vice President and Chief Financial Officer in January 1999 after being named Vice President and Chief Financial Officer in November 1994. He served as Chief Accounting Officer from January 1993 to November 1994. He was employed by Gilliam, Coble & Moser, certified public accountants, from 1981 to 1992, the last six years of which he was a partner of the firm in charge of various real estate clients. Mr. Marchisello is responsible for the Company's financial reporting processes, as well as supervisory responsibility over the senior officers that oversee the Company's accounting, finance, corporate communications and information systems functions. Mr. Marchisello is a graduate of the University of North Carolina at Chapel Hill and is a certified public accountant.
 
Thomas E. McDonough. Mr. McDonough was named Executive Vice President - Chief Operating Officer in August 2011. He joined the Company in August 2010 as Executive Vice President of Operations. Previously, he was the Co-Founder and Principal of MHF Real Estate Group, a real estate asset management firm, from September 2009 to August 2010. He served as Chief Investment Officer and was a member of the Investment Committee at Equity One, Inc. from July 2007 to April 2009. From April 2006 to July 2007, Mr. McDonough was a partner at Kahl & Goveia, and from February 1997 to April 2006, he was employed by Regency Centers Corp., and its predecessor, Pacific Retail Trust, as the national director of acquisitions and dispositions. Previously, from July 1984 to January 1997, Mr. McDonough served in various capacities, including partner and principal, with Trammell Crow Company. Mr. McDonough has supervisory responsibility over the senior officers that oversee the Company's operations, construction and development, leasing and marketing functions. Mr. McDonough is a graduate of Stanford University and holds an MBA degree from Harvard Business School.

24



Chad D. Perry. Mr. Perry joined the Company in December 2011 as Executive Vice President - General Counsel and was additionally named Secretary in May 2012. Previously, he was Executive Vice President and Deputy General Counsel of LPL Financial Corporation from May 2006 to December 2011. From January 2005 to April 2006, he served as Senior Corporate Counsel of EMC Corporation. Previously, Mr. Perry was a Senior Associate of international law firm Ropes & Gray from September 1997 to January 2005. His responsibilities include corporate governance, compliance, and other legal matters, as well as management of outside counsel relationships and the Company’s in house legal department. Mr. Perry is a graduate of Princeton University, holds a J.D. degree from Columbia University, and is a member of both the Massachusetts and California bar associations.

Carrie A. Geldner. Ms. Geldner was named Senior Vice President - Chief Marketing Officer in January 2012. Previously, she held the positions of Senior Vice President - Marketing from May 2000 to January 2012, Vice President - Marketing from September 1996 to May 2000 and Assistant Vice President - Marketing from December 1995 to September 1996. Prior to joining Tanger, Ms. Geldner was with Prime Retail, L.P. for 4 years where she served as Regional Marketing Director responsible for coordinating and directing marketing for five outlet centers in the southeast region. Previously, Ms. Geldner was Marketing Manager for North Hills, Inc. for five years and also served in the same role for the Edward J. DeBartolo Corp. for two years. Her major responsibilities include managing the Company's marketing department and developing and overseeing implementation of all corporate and field marketing programs. Ms. Geldner is a graduate of East Carolina University.

Lisa J. Morrison. Ms. Morrison was named Senior Vice President - Leasing in August 2004. Previously, she held the positions of Vice President - Leasing from May 2001 to August 2004, Assistant Vice President of Leasing from August 2000 to May 2001 and Director of Leasing from April 1999 until August 2000. Prior to joining the Company, Ms. Morrison was employed by the Taubman Company and Trizec Properties, Inc. where she served as a leasing agent. Previously, she was a marketing coordinator for Mutual Service Corporation. Her major responsibilities include managing the leasing strategies for our operating properties, as well as expansions and new developments. She also oversees the leasing personnel and the merchandising and occupancy for Tanger properties. Ms. Morrison is a graduate of the University of Detroit and holds an MA degree from Michigan State University.
 
James F. Williams. Mr. Williams was named Senior Vice President - Controller in February 2006. Mr. Williams joined the Company in September 1993, was named Controller in January 1995 and was also named Assistant Vice President in January 1997 and Vice President in April 2004. Prior to joining the Company, Mr. Williams was the Financial Reporting Manager of Guilford Mills, Inc. from April 1991 to September 1993 and was employed by Arthur Andersen from 1987 to 1991. His major responsibilities include oversight and supervision of the Company's accounting and financial reporting functions. Mr. Williams is a graduate of the University of North Carolina at Chapel Hill and is a certified public accountant.

Virginia R. Summerell. Ms. Summerell was named Senior Vice President - Treasurer and Assistant Secretary of the Company in May 2011. Since joining the Company in August 1992, she has held various positions including Vice President Treasurer, Assistant Secretary and Director of Finance. Her major responsibilities include developing and maintaining banking relationships, oversight of all project and corporate finance transactions, management of treasury systems and the supervision of the Company's credit department. Prior to joining the Company, she served as a Vice President and in other capacities at Bank of America and its predecessors in Real Estate and Corporate Lending for nine years. Ms. Summerell is a graduate of Davidson College and holds an MBA from Wake Forest University Babcock School of Business.

Manuel O. Jessup. Mr. Jessup joined the Company as Senior Vice President of Human Resources in September 2012. Previously Mr. Jessup worked with Fine Mark National Bank & Trust as the Executive Vice President of Human Resources from October 2010 to July 2012. From September 2006 to August 2010, he served as Senior Vice President of Human Resources and later Executive Vice President and Chief Human Resources Officer at Chico's FAS, Inc. Previously, Mr. Jessup was employed by Sara Lee Branded Apparel from September 1985 through August 2006. While at Sara Lee Branded Apparel, Mr. Jessup held numerous leadership roles in human resources, including Vice President of Human Resources, with responsibility for domestic and international operations in Asia and Latin America. His responsibilities include oversight and supervision of the Company's Human Resources function. Mr. Jessup is a graduate of the University of South Carolina and holds an MBA from Wake Forest University Babcock School of Business.


25



PART II

Item 5.
Market For Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Tanger Factory Outlet Centers, Inc. Market Information

The common shares commenced trading on the New York Stock Exchange on May 28, 1993. The following table sets forth the high and low sales prices of the common shares as reported on the New York Stock Exchange Composite Tape, during the periods indicated.

2012
 
High
 
Low
 
Common Dividends Paid
First Quarter
 
$
30.27

 
$
27.72

 
$
0.2000

Second Quarter
 
32.75

 
28.94

 
0.2100

Third Quarter
 
34.09

 
31.50

 
0.2100

Fourth Quarter
 
34.46

 
30.87

 
0.2100

Year 2012
 
$
34.46

 
$
27.72

 
$
0.8300

 
 
 
 
 
 
 
2011
 
High
 
Low
 
Common Dividends Paid
First Quarter
 
$
27.39

 
$
24.57

 
$
0.1938

Second Quarter
 
28.05

 
24.81

 
0.2000

Third Quarter
 
28.99

 
22.38

 
0.2000

Fourth Quarter
 
30.15

 
23.98

 
0.2000

Year 2011
 
$
30.15

 
$
22.38

 
$
0.7938


Holders

As of February 1, 2013, there were approximately 476 common shareholders of record.

Dividends

The Company operates in a manner intended to enable it to qualify as a REIT under the Internal Revenue Code, or the Code. A REIT is required to distribute at least 90% of its taxable income to its shareholders each year. We intend to continue to qualify as a REIT and to distribute substantially all of our taxable income to our shareholders through the payment of regular quarterly dividends. Certain of our debt agreements limit the payment of dividends such that dividends shall not exceed funds from operations (" FFO"), as defined in the agreements, for the prior fiscal year on an annual basis or 95% of FFO on a cumulative basis.

Securities Authorized for Issuance under Equity Compensation Plans

The information required by this Item is set forth in Part III Item 12 of this document.


26



Performance Graph

The following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Act, or the Securities Exchange Act of 1934, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.

The following share price performance chart compares our performance to the index of equity REITs prepared by the National Association of Real Estate Investment Trusts ("NAREIT"), and the SNL Shopping Center REIT index prepared by SNL Financial. Equity REITs are defined as those that derive more than 75% of their income from equity investments in real estate assets. The NAREIT equity index includes all tax qualified real estate investment trusts listed on the New York Stock Exchange, American Stock Exchange or the NASDAQ National Market System.

All share price performance assumes an initial investment of $100 at the beginning of the period and assumes the reinvestment of dividends. Share price performance, presented for the five years ended December 31, 2012, is not necessarily indicative of future results.

 
 
 
Period Ended
Index
12/31/2007

 
12/31/2008
 
12/31/2009
 
12/31/2010
 
12/31/2011
 
12/31/2012
Tanger Factory Outlet Centers, Inc.
100.00

 
103.97

 
112.57

 
153.14

 
180.65

 
216.41

NAREIT All Equity REIT Index
100.00

 
62.27

 
79.70

 
101.98

 
110.42

 
132.18

SNL REIT Retail Shopping Ctr Index
100.00

 
60.20

 
59.43

 
77.15

 
74.94

 
94.62


27



Tanger Properties Limited Partnership Market Information
There is no established public trading market for the Operating Partnership's common units. As of December 31, 2012, the Company's wholly-owned subsidiaries, Tanger GP Trust and Tanger LP Trust, owned 23,515,346 units of the Operating Partnership and the Family Limited Partners collectively owned 1,190,466 units as limited partners. We made distributions per common unit during 2012 and 2011 as follows:
 
2012
2011
First Quarter
$
0.800

$
0.775

Second Quarter
0.840

0.800

Third Quarter
0.840

0.800

Fourth Quarter
0.840

0.800

 
$
3.320

$
3.175



28



Item 6.
Selected Financial Data (Tanger Factory Outlet Centers, Inc.)

The following data should be read in conjunction with our consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.
 
 
2012
 
2011
 
2010
 
2009
 
2008
 
 
(in thousands, except per share and center data)
OPERATING DATA
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
356,997

 
$
315,223

 
$
276,303

 
$
270,595

 
$
243,793

Operating income
 
109,585

 
97,936

 
79,631

 
69,940

 
78,764

Income from continuing operations
 
56,476

 
50,989

 
38,342

 
72,709

 
29,581

Net income
 
56,476

 
50,989

 
38,244

 
67,495

 
29,718

SHARE DATA
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.57

 
$
0.53

 
$
0.32

 
$
0.78

 
$
0.31

Net income available to common shareholders
 
$
0.57

 
$
0.53

 
$
0.32

 
$
0.72

 
$
0.31

Weighted average common shares
 
91,733

 
83,000

 
80,187

 
71,832

 
62,169

Diluted:
 

 

 

 

 

Income from continuing operations
 
$
0.57

 
$
0.52

 
$
0.32

 
$
0.78

 
$
0.31

Net income available to common shareholders
 
$
0.57

 
$
0.52

 
$
0.32

 
$
0.72

 
$
0.31

Weighted average common shares
 
92,661

 
84,129

 
80,390

 
72,024

 
62,442

Common dividends paid
 
$
0.8300

 
$
0.7938

 
$
0.7725

 
$
0.7638

 
$
0.7500

BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
Real estate assets, before depreciation
 
$
1,947,352

 
$
1,916,045

 
$
1,576,214

 
$
1,507,870

 
$
1,399,755

Total assets
 
1,672,425

 
1,621,815

 
1,216,934

 
1,178,861

 
1,121,925

Debt
 
1,093,537

 
1,025,542

 
714,616

 
584,611

 
786,863

Total shareholders' equity
 
513,875

 
528,432

 
421,895

 
521,063

 
265,903

CASH FLOW DATA
 
 
 
 
 
 
 
 
 
 
Cash flows provided by (used in):
 
 
 
 
 
 
 
 
 
 
Operating activities
 
$
165,765

 
$
135,994

 
$
118,500

 
$
127,297

 
$
96,970

Investing activities
 
$
(147,909
)
 
$
(361,076
)
 
$
(86,853
)
 
$
(76,228
)
 
$
(133,483
)
Financing activities
 
$
(15,415
)
 
$
227,218

 
$
(29,156
)
 
$
(52,779
)
 
$
39,078

OTHER DATA
 
 
 
 
 
 
 
 
 
 
Square feet open:
 
 
 
 
 
 
 
 
 
 
Consolidated
 
10,737

 
10,724

 
9,190

 
9,216

 
8,820

Partially-owned (unconsolidated)
 
2,156

 
1,110

 
948

 
950

 
1,352

 
 
 
 
 
 
 
 
 
 
 
Number of outlet centers:
 
 
 
 
 
 
 
 
 
 
Consolidated
 
36

 
36

 
31

 
31

 
30

Partially-owned (unconsolidated)
 
7

 
3

 
2

 
2

 
3

(1) For the year ended December 31, 2010, income from continuing operations and net income include a loss on termination of derivatives of $6.1 million.

(2) For the year ended December 31, 2009, income from continuing operations and net income include a $10.5 million gain on early extinguishment of debt from an exchange offer of common shares for convertible debt; a $31.5 million gain on acquisition of previously held unconsolidated joint venture interest and a $5.2 million impairment charge related to a property held and used in the year the charge was taken.

(3) For the year ended December 31, 2008, income from continuing operations and net income include a loss on termination of derivatives of $8.9 million.

29



Item 6.
Selected Financial Data (Tanger Properties Limited Partnership)

The following data should be read in conjunction with our consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.
 
 
2012
 
2011
 
2010
 
2009
 
2008
 
 
(in thousands, except per unit and center data)
OPERATING DATA
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
356,997

 
$
315,223

 
$
276,303

 
$
270,595

 
$
243,793

Operating income
 
109,585

 
97,936

 
79,631

 
69,940

 
78,764

Income from continuing operations
 
56,476

 
50,989

 
38,342

 
72,709

 
29,581

Net income
 
56,476

 
50,989

 
38,244

 
67,495

 
29,718

UNIT DATA
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
2.28

 
$
2.12

 
$
1.29

 
$
3.16

 
$
1.25

Net income available to common unitholders
 
$
2.28

 
$
2.12

 
$
1.29

 
$
2.91

 
$
1.26

Weighted average common units
 
24,419

 
23,723

 
23,080

 
20,991

 
18,575

Diluted:
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
2.26

 
$
2.10

 
$
1.29

 
$
3.15

 
$
1.25

Net income available to common unitholders
 
$
2.26

 
$
2.10

 
$
1.29

 
$
2.91

 
$
1.25

Weighted average common units
 
24,651

 
24,005

 
23,131

 
21,039

 
18,644

Common distributions paid
 
$
3.32

 
$
3.18

 
$
3.09

 
$
3.06

 
$
3.00

BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
Real estate assets, before depreciation
 
$
1,947,352

 
$
1,916,045

 
$
1,576,214

 
$
1,507,870

 
$
1,399,755

Total assets
 
1,671,951

 
1,621,463

 
1,216,476

 
1,178,500

 
1,121,639

Debt
 
1,093,537

 
1,025,542

 
714,616

 
584,611

 
786,863

Total equity
 
513,875

 
528,432

 
421,895

 
521,063

 
265,903

CASH FLOW DATA
 
 
 
 
 
 
 
 
 
 
Cash flows provided by (used in):
 
 
 
 
 
 
 
 
 
 
Operating activities
 
$
165,753

 
$
136,053

 
$
118,466

 
$
127,269

 
$
96,964

Investing activities
 
$
(147,909
)
 
$
(361,076
)
 
$
(86,853
)
 
$
(76,228
)
 
$
(133,483
)
Financing activities
 
$
(15,415
)
 
$
227,218

 
$
(29,156
)
 
$
(52,779
)
 
$
39,078

OTHER DATA
 
 
 
 
 
 
 
 
 
 
Gross Leasable Area Open:
 
 
 
 
 
 
 
 
 
 
Consolidated
 
10,737

 
10,724

 
9,190

 
9,216

 
8,820

Partially-owned (unconsolidated)
 
2,156

 
1,110

 
948

 
950

 
1,352

 
 
 
 
 
 
 
 
 
 
 
Number of outlet centers:
 
 
 
 
 
 
 
 
 
 
Consolidated
 
36

 
36

 
31

 
31

 
30

Partially-owned (unconsolidated)
 
7

 
3

 
2

 
2

 
3

(1) For the year ended December 31, 2010, income from continuing operations and net income include a loss on termination of derivatives of $6.1 million.
(2) For the year ended December 31, 2009, income from continuing operations and net income include a $10.5 million gain on early extinguishment of debt from an exchange offer of common shares for convertible debt; a $31.5 million gain on acquisition of previously held unconsolidated joint venture interest and a $5.2 million impairment charge related to a property held and used in the year the charge was taken.
(3) For the year ended December 31, 2008, income from continuing operations and net income include a loss on termination of derivatives of $8.9 million.

30



Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statements

Certain statements made in Item 1 - Business and this Management's Discussion and Analysis of Financial Condition and Results of Operations below are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995 and included this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, beliefs and expectations, are generally identifiable by use of the words 'believe', 'expect', 'intend', 'anticipate', 'estimate', 'project', or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect our actual results, performance or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, those set forth under Item 1A - Risk Factors.

The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere in this report. Historical results and percentage relationships set forth in the consolidated statements of operations, including trends which might appear, are not necessarily indicative of future operations.


31



General Overview

At December 31, 2012 , we had 36 consolidated outlet centers in 24 states totaling 10.7 million square feet. The table below details our development and acquisition activities that impacted our results of operations and liquidity during 2012, 2011 and 2010. In the discussion that follows we discuss the impact these developement and acquisition activities had on our results of operations compared to that of our existing properties, which we define as properties that have been in operation for the full duration of the comparative periods, and which did not undergo a significant expansion.
Center
 
Date Acquired/Open/Disposed/Demolished
 
Purchase Price (in millions)
 
Square Feet (in thousands)
 
Centers
 
States
As of January 1, 2010
 
 
 
 
 
9,216

 
31

 
21

New development:
 
 
 
 
 
 
 
 
 
 
Mebane, NC
 
November 2010
 
 
 
319

 
1

 

Disposition:
 
 
 
 
 
 
 
 
 
 
Commerce I, GA
 
July 2010
 
 
 
(186
)
 
(1
)
 

Demolition:
 
 
 
 
 
 
 
 
 
 
Hilton Head I, SC
 
First quarter 2010
 
 
 
(162
)
 

 

Other
 
 
 
 
 
3

 
 
 
 
As of December 31, 2010
 
 
 
 
 
9,190

 
31

 
21

Redevelopment:
 
 
 
 
 
 
 
 
 
 
Hilton Head I, SC
 
March 2011
 
 
 
177

 
1

 

Acquisitions:
 
 
 
 
 
 
 
 
 
 
Jeffersonville, OH
 
June 2011
 
$
134.0

 
410

 
1

 
1

Atlantic City, NJ and Ocean City, MD (1)
 
July 2011
 
$
200.3

 
689

 
2

 
2

Hershey, PA (2)
 
September 2011
 
$
49.8

 
247

 
1

 

Other
 
 
 
 
 
11

 
 
 
 
As of December 31, 2011
 
 
 
 
 
10,724

 
36

 
24

Expansion:
 
 
 
 
 
 
 
 
 
 
Locust Grove, GA
 
Second quarter 2012
 
 
 
26

 

 

Other
 
 
 


 
(13
)
 

 

As of December 31, 2012
 
 
 
 
 
10,737

 
36

 
24

(1) Substantially all of the economic interests in Phase I & II of Atlantic City Outlets The Walk and Ocean City were purchased on July 15, 2011, and substantially all of the economic interest in Phase III if Atlantic City Outlets The Walk was purchased on November 1, 2011.

(2) Excludes a $6.2 million loan to the noncontrolling interest holder collateralized by their ownership interest in the property.



32



Leasing Activity
The following table provides information for our consolidated outlet centers regarding space re-leased or renewed during the years ended December 31, 2012 and 2011, respectively:
 
2012
 
# of Leases
Square Feet
Average
Annual
Straight-line Rent (psf)
Average
Tenant
Allowance (psf)
Average Initial Term (in years)
Net Average
Annual
Straight-line Rent (psf) (1)
Re-tenant
136

450,000

$
31.72

$
42.25

8.57

$
26.79

Renewal
322

1,536,000

$
21.75

$
0.04

4.56

$
21.74

 
 
 
 
 
 
 
 
2011
 
# of Leases
Square Feet
Average
Annual
Straight-line Rent (psf)
Average
Tenant
Allowance (psf)
Average Initial Term (in years)
Net Average
Annual
Straight-line Rent (psf) (1)
Re-tenant
156

548,000

$
28.24

$
33.79

8.17

$
24.10

Renewal
307

1,459,000

$
20.54

$
1.33

4.57

$
20.25

(1) Net average straight-line rent is calculated by dividing the average tenant allowance costs per square foot by the average initial term and subtracting this calculated number from the average straight-line rent per year amount. The average annual straight-line rent disclosed in the table above includes all concessions, abatements and reimbursements of rent to tenants. The average tenant allowance disclosed in the table above includes landlord costs.

Results of Operations

2012 Compared to 2011

NET INCOME

Net income increased approximately $5.5 million in the 2012 period to $56.5 million as compared to $51.0 million for the 2011 period. The increase in net income was a result of a $41.8 million increase in operating revenues, a $2.6 million decrease in acquisition costs and a $158,000 decrease in abandoned development costs, partially offset by a $10.9 million increase in operating expenses, a $7.3 million increase in general and administrative expenses, $4.4 million in higher interest costs, $14.7 million in higher depreciation and amortization amounts and $1.7 million in higher losses on unconsolidated joint ventures.

BASE RENTALS
Base rentals increased $27.6 million, or 13%, in the 2012 period compared to the 2011 period. The following table sets forth the changes in various components of base rentals (in thousands):
 
 
2012
 
2011
 
Increase/
(Decrease)
Base rentals from existing properties
 
$
199,129

 
$
190,423

 
$
8,706

Base rentals from new developments
 
3,947

 
2,601

 
1,346

Base rentals from acquisitions
 
30,477

 
13,408

 
17,069

Termination fees
 
877

 
508

 
369

Amortization of net above and below market rent adjustments
 
803

 
697

 
106

 
 
$
235,233

 
$
207,637

 
$
27,596


Base rental income generated from existing properties in our portfolio increased due to increases in rental rates on lease renewals and incremental rents from re-tenanting vacant spaces.


33



During the first quarter of 2011, we completed the redevelopment of our 177,000 square foot outlet center in Hilton Head I, South Carolina and throughout 2011 acquired a total of four outlet centers adding approximately 1.3 million square feet to our consolidated outlet center portfolio.

At December 31, 2012, the net asset representing the amount of unrecognized, combined above and below market lease values, recorded as a part of the purchase price of acquired properties, totaled approximately $5.2 million. If a tenant terminates its lease prior to the original contractual termination date of the lease and no rental payments are being made on the lease, any unamortized balance of the related above or below market lease value will be written off and could materially impact our net income positively or negatively.

PERCENTAGE RENTALS
Percentage rentals, which represent revenues based on a percentage of tenants' sales volume above predetermined levels, increased $2.1 million, or 23%, in the 2012 period compared to the 2011 period. The following table sets forth the changes in various components of percentage rentals (in thousands):
 
 
2012
 
2011
 
Increase/
(Decrease)
Percentage rentals from existing properties
 
$
9,325

 
$
8,495

 
$
830

Percentage rentals from new developments
 
248

 
66

 
182

Percentage rentals from acquisitions
 
1,599

 
523

 
1,076

 
 
$
11,172

 
$
9,084

 
$
2,088

The increase in percentage rentals is partially related to new developments and acquisitions completed in the 2011 period. In addition, percentage rentals from existing properties increased 10% due to higher tenant sales productivity. Reported tenant comparable sales for our consolidated properties for the rolling twelve months ended December 31, 2012 increased 2.9% to $376 per square foot. Reported tenant comparable sales is defined as the weighted average sales per square foot reported in space open for the full duration of each comparison period.

EXPENSE REIMBURSEMENTS
Expense reimbursements increased $10.5 million, or 12%, in the 2012 period as compared to the 2011 period. The following table sets forth the changes in various components of expense reimbursements (in thousands):
 
 
2012
 
2011
 
Increase/
(Decrease)
Expense reimbursements from existing properties
 
$
86,583

 
$
83,800

 
$
2,783

Expense reimbursements from new developments
 
1,532

 
1,172

 
360

Expense reimbursements from acquisitions
 
11,681

 
4,397

 
7,284

Termination fees allocated to expense reimbursements
 
278

 
251

 
27

 
 
$
100,074

 
$
89,620

 
$
10,454


Expense reimbursements, which represent the contractual recovery from tenants of certain common area maintenance, insurance, property tax, promotional, advertising and management expenses, generally fluctuate consistently with the reimbursable property operating expenses to which they relate. Existing property expense reimbursements increased in the 2012 period compared to the 2011 period as a result of an increase in the portfolio's overall average occupancy rate, as well as a number of leases recently executed which require a higher reimbursement amount of our operating expenses.


34



OTHER INCOME
Other income increased $1.6 million, or 18%, in the 2012 period as compared to the 2011 period. The following table sets forth the changes in various components of other income (in thousands):
 
 
2012